Battle lines have been drawn in the entrepreneurial world, with venture capital squaring up to its penny-pinching cousin, bootstrapping.
Before budding entrepreneurs can reach the dizzying highs of business triumph, they must first launch their idea off the ground, and this requires finance. Venture capital (AKA private equity) is hard to obtain, competition is immense and investors can be reluctant to hand over their capital without evidence that the business can work and eventually bring a return. Most start-ups must go through a phase of bootstrapping before they can prove to investors that they are a good bet. The question is – can bootstrapping successfully continue indefinitely?
Bootstrapping means entrepreneurs going it alone, by whatever means possible. This can involve tapping into savings and accumulating private debt, including loans and borrowing on credit cards. It is clear that if bootstrapping goes wrong, it can go terribly wrong for the individuals involved.
However, there are also many positives associated with bootstrapping. Bootstrapping does not mean sacrificing equity, and it allows entrepreneurs to keep control of their business. This can seem undeniably appealing; the dream of starting your own business is, after all, about freedom. Bootstrapping allows business owners to call the shots (and, perhaps, make their own mistakes).
Investing personal finances arguably promotes caution, and a real consideration regarding where money is being spent. When their livelihood and savings are on the line, people tend to think through every business decision with precision. Lastly, when you bootstrap there is only one possible source of income, and that is your customer. Pleasing the customer is an essential element of business that many failed start-ups somehow seem to have missed, and bootstrapping can help prevent this. Yet, for many businesses, a point is reached when the credit cards are ‘maxed’, when customer revenue cannot come in fast enough and at that time growth crawls. Bankruptcy is a real possibility and driving the business forward seems unfeasible.
It is hard to obtain venture capital backing, but it is also hard to grow your business at a sufficient rate without it. Focussing on building the product is not enough, marketing and sales must be grown if the business is to succeed. The fact of the matter is it takes money to be noticed.
Hiring is affected, too. When candidates look for a job with a start-up, they need to know that the business they might join is financially secure, with viable plans for growth. Investors can provide credibility and reassurance. Joining a start-up can feel like a risk to many, and if the business is stagnant and relying on personal investment to stay afloat, it may not seem like a risk worth taking. For business to attract the best, they need to not only be ambitious, but also have the finances to back up their ambition.
It is all about the rate of success. If your business survives bootstrapping financially, it still faces the hurdles of sustained growth and marketing without an influx of investment. When it comes to starting your business, bootstrapping is for the beginning – otherwise it can be the end.
Copyright (c) BlueGlue 2014
Many of us look forward to that longer break that bank holiday weekends bring, because it can provide the perfect opportunity to get together with family and friends, who we don’t see as much as we’d like due to the demands of our busy daily lives. But do businesses look forward to bank holidays?
Each bank holiday is reported to cost the UK economy £2.3bn (according to the Centre for Economics and Business Research) and they can cause a headache for business owners, with some questioning the need for so many public holidays. But the UK has the lowest number of national public holidays of all major economies, with just eight public holidays compared to a G20 average of 12. The UK even has fewer public holidays than countries viewed as stereotypically industrious, including Japan (15) and China (11).
According to Direct.gov.uk, bank or public holidays do not have to be given as paid leave, but an employer can choose to include bank holidays as part of a worker’s statutory annual leave.
Most retailers are now open during bank holidays and expect their staff to work their normal or Sunday hours. However, most offices close, while choosing to include bank holidays within employees’ holiday entitlement. Most office-based small businesses close, but some staff (and many business owners, of course) work from home.
According to ACAS and Direct.gov.uk, this should come out of holiday entitlement, they also state that: “Employers can set the times when workers can take their leave - for example, a Christmas shut down.”
Many seasonal businesses don’t allow holiday to be taken during the summer months, but is this fair? For parents in the UK, taking holiday during term time to fit in with school holidays means higher costs for breaks away.
If you are an office-based business you might want to allow employees to take it in turns to work bank holidays or allow some staff to work from home if possible.
Speak to your customers and find out if they are working before you shut down your business for the bank holiday weekend. If you will be sitting in a silent office with phones that are unlikely to ring, it might be just as well to close down.
Other businesses welcome bank holidays, of course, because they are able to cash in on extra money being spent by people who are happy because they are not at work.
Copyright © Chinny Ogbuagu 2014, regular writer for the Pitney Bowes blog.
The right for employees to request flexible working is now in full force. With these new regulations, the Department for Business, Innovation and Skills predicts that up to 20 million people across the country could be asking their employees to work flexibly. Employers can reject these requests, but whether they do or not, to have a happy, satisfied workforce, start-ups and small businesses must have the right technology and communication systems to accommodate modern working methods.
Recently we conducted some research looking at the working habits of small businesses and it seems that employees up and down the country are waking up to the benefits technological advances provide in driving growth.
The survey suggests that 78% of small businesses are now using cloud-computing solutions such as Google Docs, Livedrive and GoTo Meeting. The smartphone revolution is part and parcel of everyday life and increasingly in the working lives of UK small business employees, with 87% using smartphones for work and 64% using tablet computers.
To keep staff costs low, and with the majority of small businesses employing just a handful of people, only 20% employ an IT Manager, with 64% of small-business owners taking responsibility for their IT operations.
The use of technology to enable better ways of working will be important for small businesses in setting themselves apart from the competition and achieving sustainable growth. Places of work are no longer restricted to one location, and employees are increasingly logging on and working from various sites. This will only become more prevalent as the new rules around flexible working are exercised.
With that in mind, here are a few pieces of technology advice for start-ups. As your business grows and more employees come on board, they might request the right to work flexibly, so make sure you have the infrastructure in place from the start.
Little maintenance is needed with cloud solutions because software updates download automatically and it also enables access to documents from anywhere with an internet connection, which is crucial for remote workers.
With today’s technology you can easily run a business that doesn’t depend so heavily on paper, and this can save you a lot of money. Simple functions such as using ‘Track changes’ in Word mean you don’t have to print pages and pages and then waste ink by scrawling over them.
With smartphones increasingly being used for business, make full use of free business apps such as Evernote and Basecamp, both of which let you save notes and create and share to-do lists with colleagues, simply from the touch of a screen.
Blog provided by Aisling Brennan, marketing manager of faxing service provider eFax.
Sacré bleu. The All-Party Parliamentary Group on Modern Languages has asked all political parties to include a new “framework for national recovery in language learning” in their 2015 general election manifestos.
That framework should include pledges to “transform the reputation of UK citizens as poor linguists, reluctant to value languages other than English” and “actively encourage business and employers to get involved in tackling the crisis”. The good news for businesses is the group also suggested that employers might be offered tax incentives to “recruit or train homegrown linguists”.
Our less than impressive reputation for linguistic prowess is well earned it seems, with the UK lagging way behind other EU countries when it comes to speaking foreign languages. According to European Commission (EC) research, only 39% of UK adults can hold a conversation in a foreign language, compared to the EU average of 54%.
“So what?” you might say, after all, “English is the international language of business”, n’est pas? Well, to an extent, oui, I mean, yes, but English isn’t always widely spoken in many markets and lack of foreign language skills is holding back many UK businesses – and that could include yours.
UK employers frequently bemoan the shortage of foreign language-speaking British workers. A UK Commission for Employment and Skills survey in 2013 found that where vacancies were not filled because of a lack of skills, in almost a fifth of cases that meant lack of foreign language skills. According to the CBI/Pearson Education and Skills Survey 2014, 65% of firms require foreign language skills.
Au contraire, you counter, as you sit there all smug, armed with your conversational French, Spanish or Italian. Yet many Brits who can speak a foreign language don’t put that key skill to good commercial use, and perhaps too many of us are guilty of not looking beyond our own shores as much as we should. According to the CBI, only a fifth of UK SMEs export, despite businesses being 11% more likely to survive if they do.
Readers of a Euro-sceptic disposition might want to look away now, but UK exports to EU countries alone support 4.2m UK jobs and are worth £211bn to the national economy (source: FT.com), while total UK exports to non-EU countries are worth almost £150bn a year (source: Gov.uk). The US remains the most important single market to the UK economy, accounting for £41bn or 13.4% of all exports (source: Santander UK).
The British Chambers of Commerce (BCC) recently published its International Trade Survey for Q1 2014 and it found that while 90% of UK firms have ambitions to grow domestically, only 43% are looking beyond the UK for sales, despite 55% of current exporters reporting a positive impact on their bottom line within just 12 months of expanding into new markets abroad.
John Longworth, BCC director general, says: “We need to do more as a nation to take the fear out of exporting. I speak to businesses that have full order books here in the UK and don't see why they would need to take their goods and services overseas. To transform businesses’ mindset, we need to create an environment that makes it worthwhile for them to export.
“We must invest even more in supporting and promoting international trade. The UK should be matching the resourcing dedicated to export support provided by our major international competitors. And government intervention must be more focused in areas that can really make a difference, such as providing greater access to finance to growing firms – particularly when a quarter of non-exporters say that increased funding would encourage them to export. Only a concerted national campaign and sustained investment will get more UK firms to look beyond our shores for growth opportunities.”
Even simple steps, such as creating pages in select foreign languages could attract many more overseas visitors to your website and give your sales a serious boost. More of us finally committing to learning to speak a foreign language well would also greatly help, of course.
• Visit the BCC Export Britain website for more information about how to start selling to customers overseas.
Blog written by Mark Williams, freelance content writer and editor of Start Up Donut.
It is only natural to try to compete on price. But what you’re telling customers is “buy from me because I’m cheaper”, when what you should really be saying is “buy from me because my product meets your needs at an affordable price”.
Where does this tendency come from? Price is very rarely the primary motivator. What tends to happen is once someone has decided to buy from you they just want to pay a bit less. It makes them feel like they got a bargain. How often have you thought to yourself: "I will only buy this product if it is at this price"? Maybe at an auction, but you wouldn’t think this way when making daily purchasing decisions.
There have been many studies showing that a small proportion of customers buy on price and the rest for a multitude of other factors. If price was the primary motivator there would be no luxury items. Luxury items sell for high prices because they are seen as exclusive, high quality and, of course, they make the buyer feel good about themselves.
The key is to make sure that your product is unique. So why is it that some sales people are against raising prices?
Some will say: "Nobody in this market will pay that sort of price!" Alas, if the product is worth it, customers will. Many successful entrepreneurs have created extra value or new products in their industry for their customers and have charged a higher price.
A classic example is the Dyson vacuum. When the first Dyson came out in the mid-1990s it sold for £400. In today's money that is £600 at least. Yet they were snapped up and made Dyson a fortune. Why did it sell? It was different and made people feel good about themselves. A boring household appliance has been turned into something a bit cool, trendy and exclusive - a bit like Apple did with the home computer.
So many sales people complain that the service or product they are selling is too expensive, but they forget that others in their team are not having any problems.
Remember the “bitterness of low quality lasts longer than the sweetness of low price”. If you put up your prices, you will always lose some customers, but only those who have bought solely on price. So what? Isn’t it better to have a higher proportion of customers who actually value your products or your services and are prepared to pay for them? Obviously, charging more money brings in more capital, which enables you to invest more into your business. It can also allow you to cut costs as in some ways fewer customers paying more are likely to use up less of your time complaining!
It’s probably best that you do not set your own prices. The best person for the job is your customer. Ask them what they like and don't like about your products or services. Listen to what they say and focus on improving the negatives. Test everything and raise your prices by a minimum of 5% and perhaps a maximum of 20% on your existing offerings.
If you raise prices, make sure you have a plan. Try a few customers and see what their reaction is. Give them plenty of warning, because no one likes a surprise increase. If you lose too many, keep monitoring and adjust if necessary. Can you start charging for products or services that have previously been free? Almost always free stuff isn’t as great as paid-for services and customers often expect this.
When I was selling information about businesses for sale, the yearly subscription was £165. This had not changed in many years. Our sales were good, but we decided to put up the price to £195 and this made no difference to our monthly figures of c.100 new subscriptions a month. In fact – it went up.
Three months later we put the price up to £225 a subscription. Sales levelled off, but our margin was up significantly. Our closest competitor was offering a similar and in our view inferior product at £99 a month. When the Credit Crunch hit, we lowered it back down to £195, but never back to £165. It turns out that my co-director just felt uncomfortable charging more than £200! People deemed the product to be worth it and in the end, it helped us to drive more innovation like e-books, additional products and a better website experience.
One computer consultant I’ve hired in the past was charging £35 per hour. I knew this was far too low but didn’t let on, of course. They decided to later raise the price to £45 per hour but this made no difference to me. I am actually happier because I am confident they will deliver an even better service.
Copyright © 2014 Robert Moore of KSA Group and www.companyrescue.co.uk.
Steve Jobs famously said that he didn’t need to listen to his customers, because they don’t know what they wanted yet. Technology entrepreneur Alan Kay is also quoted as saying: "The best way to predict the future is to invent it”.
In a 2012 report in the Harvard Business Review, Mario D’Amico, senior VP of marketing at Cirque du Soleil, said: “Customers don’t know what they want until they see it. You can’t rely on them to decide what your next product will be.”
Is this true? Should we listen to customers or is sticking to our guns the best way to succeed?
Studies have shown that most innovative ideas come when we work alone. It can be tempting to follow your market research and adapt your original ideas to better fit the market. However, this can be problematic, because you risk losing sense of your original product and take away that which sets it apart from other products.
Apple has been a market leader for decades and has put innovation and uniqueness at the forefront of its product releases. However, Apple has gained many loyal followers and is seen as a desirable luxury brand with stylish and ‘on-trend’ products, so there isn’t too much risk when releasing a product following little market research and trials.
Cirque du Soleil is a performance art company that has always been unlike anything else, known worldwide for its creativity. Therefore, it does not rely on customer feedback – its popularity is based on its uniqueness.
It is likely that your business is unlike either of these and therefore, although their advice is based on years of experience and success, it should be taken with a pinch of salt.
So, what we can learn from Steve Jobs is…
Copyright © 2014 Natalie Naik for Miss Macaroon